Thursday, November 21, 2013

VC has a gender gap problem, perhaps an innovation problem too!?


I recently wrote about the NVCA/DeSantis Breindel survey that looked at the claimed and desired attributes of VCs vs entrepreneurs. (The Brand Influence Guide For The Venture Capital Industry). This intriguing study showed that there was a brand "gap" and graphically represented it through a forced ranking of entrepreneur favored characteristics vs a VC derived ranking for the same characteristics. (e.g. hands-on, supportive, trustworthy etc).

An additional important "gap" was gender based. Specifically in answer to the question: "Does the gender make-up of a VC's partner base matter to CEOs?" 1 in 4 of CEOs surveys said "Yes" ... but only 1 in 10 of the VCs gave the same answer. And2 of 3 women CEOs said the gender make of a VC's partner base mattered!

What I didn't state at the time, was that this particular result (I think it's safe to say) is a reflection of the underlying gender diversity "gap" of the Venture Capital Industry. Namely that women make up just 1 in 10 (11% to be exact) of investment professionals at Venture Capital firms as reported by the NVCA. And in terms of senior decision makers its much worse ... for example the number of women VCs listed in the most recent Forbes Midas List fell to just 3 of 100 ranked.

Perhaps this lack of diversity (and it's not just gender) is one reason VCs in aggregate do a poor job for their LPs? As I noted end last month, VCs collectively haven't beaten the S&P 500 for a decade. To be exact the data shows 1, 3 and 5 year net to LP returns lag the public markets while the 10 year record is roughly a wash.

I sit on the Board of the Center for Talent Innovation which has just done some impressive work showing the way that workforce diversity unlocks innovation - and sets out in some detail what "diversity" actually is, well beyond gender. The analysis makes the case against homogenous organizations and in favor of those where leadership demonstrates "2D Diversity".

The CTI conclusion is as follows (my highlights):

But what drives serial innovation? CTI’s ground-breaking research reveals the engine to be a diverse workforce that’s managed by leaders who cherish difference, embrace disruption, and foster a speak-up culture. Inclusive leader behaviors effectively “unlock” the innovative potential of an inherently diverse workforce, enabling companies to increase their share of existing markets and lever open brand new ones. By encouraging a proliferation of perspectives, leaders who foster a speak-up culture also enable companies to realize greater efficiencies and trim costs—another way that innovation drives bottom-line value.

You can see more about the research findings here:
Executive Summary
Infographic

You can follow CTI's work at:
@talentinnovate
and its founding President Sylvia Ann Hewlett at:
@sahewlett